Business, Finance & Economics

Thailand's iPhone underground


BANGKOK, Thailand — Come weekends, Bangkok's premiere cell phone bazaar is a nerve-zapping labyrinth.

Its 500-plus stalls are crammed into Maboonkrong shopping center's fourth floor. Customers choke the narrow aisles. At least three cell phones are always bleeping within earshot, piercing the language stew in the air: Thai, English, Russian, Arabic and the sound of salesgirls cooing for customers.

Some shops are cubicle-sized. Others boast cramped showrooms. But inside nearly every display case is the holy grail of Bangkok cell phone chic: an illegally smuggled Apple iPhone.

The slick and illicit Web-browsing phones have been priced at roughly $800 here — as much as eight times the U.S. retail price and more than double the average Thai's monthly salary.

"It's like a Louis Vuitton handbag," said Jesada Chandraprasert, who tracks Thai technology trends for CNET Asia. "Anyone seen holding it is a step up from a regular person."

Now ubiquitous in Europe and America, Apple's iPhone was released this year in more than 50 countries, including Singapore, Estonia and Ecuador. Countries far less developed than Thailand – Botswana among them – are on Apple's "Coming Soon" list.

But in tech-obsessed Thailand, where cell phone ownership is at an estimated 70 percent, the iPhone is just now being released.

Legit iPhones will contend with an existing iPhone black market, which for years has thrived in the vacuum and given rise to a network of smugglers and code breakers.

"The iPhones move fast," said Pi, a Maboonkrong vendor who runs a stall painted solar yellow. "It's hip. It's sharp."

Though the underground phones are exorbitantly priced — the cost is roughly one month's rent in a downtown condo — the profit margin isn't what attracts underground vendors. Much of that goes to the smuggler, who vendors say bring the phones in from the U.S., Europe, and factories in China.

Rather, it's all about turnover, Pi said. His small operation, a blip among hundreds at Maboonkrong mall, moves two or three iPhones each day.

How do smugglers steer so many iPhones around customs agents, and avoid paying them stiff duties?

Pi's grin curls into a wide smile. "Many ways," he said, before clamming up.

Though Apple has been eager to swoop in and seize back the Thai market, bureaucratic tangles and pay-as-you-go plans have stood in the way. The latest Apple iPhones are designed to tap into a "3G" or third-generation cell signal network powerful enough to stream both speech and data. But, for now, Thailand is stuck with a souped-up version of a second-generation or "2G" network, designed for text messages and speech.

There are several ways to illegally tap iPhones into Thailand's cell network.

Phone hackers commonly employ "stealth SIMs" — a black market metallic chip sandwiched over the SIM or "Subscriber Module Identity" card. The legal SIM card, which is removable, stores each phone's unique number.

When paired with its black market stealthy counterpart, the phone can crack the network illegally. Many vendors brazenly keep a bin of stealth SIMs on display.

Still, Thailand's hotwired iPhones can only stream the internet at a speed far slower than most European and American networks. One underground vendor compared it to driving a Ferrari in first gear.

The state agencies Telephone Organization of Thailand and Communications of Authority of Thailand have promised a cell network upgrade for nearly two years.

The latest in a series of shifting government projections promises a 2009 roll-out with 350,000 subscribers. But outside of a few beta trials — most notably in a Bangkok mall and the northern capitol Chiang Mai — the plans continue to lag.

Launching a legit iPhone market in Thailand has been doubly complicated by Thais' reluctance to pay monthly subscription fees. In the U.S., iPhones go for as little as $99 USD, as long as customers agree to a two-year contract with Apple ally AT&T, which subsidizes the phone's production cost.

But most Thais avoid contracts and monthly bills altogether, preferring to add phone minutes using scratch-off top-up cards. The cards are ubiquitous — available in 7-11s, grocery marts and automated machines — and offer a code that's dialed in to unlock more minutes.

For now, Apple is replicating its U.S. approach, offering low-priced iPhones through Thai mobile carrier TrueMove with the promise of two-year contracts. Apple would not comment for this story.

Even without long contracts, the cheapest legit Thai iPhones are priced at roughly $200, far less than underground prices. Apple's attempt to reclaim the iPhone from underground vendors will likely succeed in time.

But for now, the illegal fashion accessory remains on the black market, and a must-have in the stalls of Maboonkrong.